Termination Salvation?

[This post is by FMC legal intern Adam Holofcener]

Ready for your head to explode? Let’s talk copyright termination of transfer!

This is a topic that is incredibly complex but super-important to ensuring that musicians and other creators are able to regain control of their copyrights that they “transferred” to another entity (think labels and publishers) after a certain amount of time. Congress set the period after which these copyrights revert back to their authors, in the 1976 Copyright Act. Unfortunately, the law also includes some unintended head-scratchers.

The Act allows for authors to terminate grants that they made of their copyrighted material 35 years after the grant was made. This means that if you are a songwriter or performer and you transfer your song to a label or publisher in exchange for an advance, promotion, distribution etc., you get your copyright back — either the sound recording or the composition copyright — after 35 years. The reason for this is to give creators a “second bite at the apple” with regards to their work. Sounds pretty straightforward right? Not so fast.

Recently, it came to the attention of the Copyright Office that there was a “gap” in the termination provision of the 1976 Copyright Act for works that were licensed before January 1, 1978, but not created until after that date. Technically, works that fall in that gap are not statutorily allowed to be terminated. (We’ve written about this subject before; check out our previous posts here and here).

FMC attempted to wrap our heads around the issue in a comment to the Copyright Office, who are attempting to close this gap through regulation. It seems pretty clear to us that it was not the intention of Congress in writing the 1976 Copyright Act to deny a group of creators eligibility to get their rights back. The question is how to fix the problem.

In March 2010, The Copyright Office released a Notice of Public Inquiry and Request for Comments regarding the application of the termination of certain grants of transfers. In the reply comment we filed in May 2010, we encouraged the Copyright Office to further analyze the discrepancies in the Act to make sure that all those who fall in the termination gap are able to get their copyrights back. Our recommendations were twofold: 1) create a process through which works falling in the gap can terminate and 2), make sure that musicians become aware of the termination process in general.

In December 2010, the Copyright Office published its Analysis of Gap Grants [PDF], which included language from FMC’s comment:

This ‘second bite at the apple’ is even more important in an environment where product and broadcast spectrum scarcity has far less bearing on whether a musical work finds an audience. As more copyrights become eligible to revert back to creators, we may find that the artists themselves exploit their works in novel ways that could be beneficial to the overall health of the music marketplace.

Neat!

Armed with feedback from a range of stakeholders, the Copyright Office then released a Notice of Proposed Rulemaking, which includes relevant changes to the notice of termination filing procedure. The Copyright Office’s new regulation allows for musicians who fall into the gap to use the date of their works’ creation as the date when they signed away their copyright, thus, closing the gap.

FMC applauded the Copyright Office for its analysis, while stressing our concern for a narrow application of the new proposed regulation. If the regulation is read broadly, it would mean that allgrants would be executed — and therefore start the 35-year shot clock — when a work is created, as opposed to when the transfer was made. This would disadvantage artists who benefit from having the clock start ticking as soon as possible on works that they license. The regulation only applies to individuals who fell into the perilous termination gap, and we want to make sure that it is interpreted in just that way.

In its Final Rule on the matter, the Copyright Office did acknowledge that Congress may have a role to play in amending the Copyright Act so that it reflects the new regulation, which we think is appropriate. However, getting Congress to stuff doesn’t happen overnight. So for now, we’re hoping that the Copyright Office’s new regulation will suffice in making sure musicians can have the opportunity to regain ownership of their work.